IA Forward
The Independent Insurance Agency Playbook: The insurance business is all about playing an infinite game. Shane, Tonya, and Mike discuss how to play the long-term game of being a successful agent and creating a culture of freedom for yourself.
Learn more at www.integrapartnernetwork.com
IA Forward
Building the Business Behind the Bonus: The Truth About Profit Sharing, Part One
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Why do some agencies benefit from contingency bonuses, while others never see them? The answer may not be what you think. Episode 312 isn’t about chasing a bonus check, it’s about building a business that earns them consistently.
We talk through the evolution of compensation in the insurance industry, why profit sharing exists today, and how agency structure, retention, and loss ratio all play a role in the outcome. Whether you’re part of a network or operating on your own, understanding how this works can change the way you think about growth, carriers, and long-term strategy.
Learn more at IntegraPartnerNetwork.com.
This is IA Forward, your playbook for success as an independent insurance agent. Now, here to help you knock it out of the ballpark are your hosts, Shane Tatum, Tanya Leed, Mike Basil, and Robbie Javor.
SPEAKER_04Welcome to IA Forward. And just to let you guys know that I keep seeing Shane glancing off to the side. So what's what's going on in Existence?
SPEAKER_00Yeah, I know. I'm sorry. This is going to be a total like I need another squirrel. Like I need a distraction in my life. Um, so my nephew is currently in the showing at this moment of recording, showing livestock. He's showing his goat um at the Austin Junior Livestock Show. So I'm I'm like watching him. He's literally in the middle of it. He's getting, he just got pulled, which is something important in in that world.
SPEAKER_04Like making the finals.
SPEAKER_00It's like making the finals. Like, yeah, there you go. So um, so now he's getting you know, waiting and he's getting anyway. So I'm gonna be a little distracted, but I'm gonna keep up. I'm I'm I'm gonna keep up. We're gonna do this, we're gonna do it well.
SPEAKER_04Speaking of Texas, speaking of Texas, so so I am I'm flying to Dallas on Saturday or Fort Worth and to speak at a uh women's conference there. And and I sort of putting together my packing list last night, and I thought, you know, I should check the weather real quick. And uh just to see if it's gonna be raining and or every time I go to Fort Worth, it's raining. So I said, Hey Alexa, what's the weather on Saturday in Fort Worth? And she said, I mean, the weather in Fort Worth will have a high of 95 degrees and a low of and I'm going, did I did I just hallucinate? I just hallucinated, like, like I didn't hear what what she said. And um, I'm actually working with an audiologist and a neurologist because sometimes I'm like hearing things that aren't aren't right. So I'm like, okay, well, this is one of those instances. So I said, you know, Alexa, what is the weather on Saturday and before Earth? The weather on Saturday Fort Worth has a high of 95 degrees, and I'm going. But in the what, what, what? So then I'm like, I know she's not right. You know, sometimes Alexa has her moments, and so I pull up the weather channel, and the weather channel says there's gonna be a high of 97. It's 31 degrees in Pensacola, and it's gonna be 97 degrees in Fort Worth on Saturday because apparently I missed that the entire western part of the country is going to basically be on the surface of the sun this weekend.
SPEAKER_03Hold on, give me a minute. I'm just getting my airfare together.
SPEAKER_00Well, look, here's the reality. I I there's we've seen memes around, you know, if you well, uh Mike doesn't know about memes because he's not on social media, but right. Well, there is that, you know, but yes, the the rest of the world. So there's like these things like my weather is drunk, the drunk, the weather is drunk in Texas right now. Like, okay, I kid you not, like we're we're kind of doing the same thing. Um, we're getting ready to go up to Lawrence, Kansas for a weekend softball series. Um and it was 17 degrees Monday, I think, in Lawrence, Kansas. It was 17 yesterday. And 17 years, it was really cold. And yeah, um, Julie informs me that it's supposed to be 94 degrees in Lawrence, Kansas on Saturday as well.
SPEAKER_04Yeah, it's it's 76 today.
SPEAKER_00And yeah, I mean I mean, so the weather is officially drunk everywhere except probably Buffalo, where it's still minus 40.
SPEAKER_04Where we're in Buffalo this weekend, it's 20 degrees, it's 20% colder than average. Okay, because I I looked at the map of the whole entire country and I specifically looked for you, Mike, and like there's orange and red and maroon until you get to your area of the country where it's like ice blue because it's not as warm as it's supposed to be. Just for you.
SPEAKER_03That's fantastic. Yes, thank you. I'm glad you looked that up.
SPEAKER_04I did. I actually meant because I was like, oh, it's gonna be hot for Mike. Mike's gonna be happy, and I was like, maybe not. Maybe not. So by the way, I just I just have to say our last podcast, um, with the uh for some reason I did keep the toilet tissue tiara from our our last podcast. So you guys that are that are watching this to not see the last podcast, you need to you need to tune in for that. This caused great confusion in my household yesterday. Like my husband was like, I you know, I usually don't ask questions, but why do you have a t-shirt, uh a tiara made out of toilet paper? And I'm like, well, you know, it's a work thing. And he goes, I don't think that Shane uh approved that. So anyway.
SPEAKER_03I'm just shocked it's in one piece. If I had something laying around here like that, it would get torn apart by the pup. Yeah.
SPEAKER_04Well, my pup's only about eight inches tall, so she can't quite reach the top of my desk.
SPEAKER_03Yeah, I can I had, you know, I had to take mine down. That stuff needed to go back into circulation.
SPEAKER_04I was impressed you had that much toilet paper at your house, actually. It was very impressive.
SPEAKER_03We're we're members at a wholesale club.
SPEAKER_04Well, our topic today is very, very relevant to all of this. So Shane's watching goats, you know. Um watching goats. But but I will say we are talking um contingency bonus, profit sharing season. And I did get out my uh Emma Waterways brochure last night just to see if we could make it. I mean, that's what we're supposed to do with profit sharing, right? Yeah, take a fabulous 10-day European river cruise.
SPEAKER_00Yeah, I mean, that's what some people do. Like you can do what you want to do, right, with the money you make. Um you earned it, you earned it, but um well, here's the thing though, before you get rolling, you can't count on it, you can't expect it.
SPEAKER_03So doing something like that with it is appropriate, but spending it before you have it is not. Or so, you know, if if you want to go that route uh and do something like that once you once it's come to light that that's gonna be something that's coming down the pipe. Well, that's you know, hey, enjoy yourself.
SPEAKER_04That's why I planned it and didn't book it.
SPEAKER_00Planned but not booked.
SPEAKER_03Correct, correct. Yeah, well, I have said now, listen, I have seen some memes. My my family does send them to me. My wife did send me one similar to that. It was like, my husband should be happy in my mind. I planned 15 vacations this year, and I only booked one, so we're actually way ahead.
SPEAKER_00That's good, that's good. You know, I uh yeah, reward yourself, right? Like that's that's awesome. And we can we can go down that path. Um, but to Mike's point, yes, don't spend it. That's that's for anything, right? Whether you're an agency owner or in your in your career, bonus is not expected. You know, that's kind of something that I think in our society, um we've moved bonusing. Some people have moved bonusing, we shouldn't, you know, say everybody, but some organizations have moved bonusing as kind of this expected thing. Um, and and you know, hey, if that's what that the organization that you work for has done, then okay, that's what that's what they want to do, right? So that's that's okay, that's a little bit different. Um, but obviously the classic Chevy Chase movie vacation, especially Christmas vacation, right? Um, Christmas vacation, it it told us not to spend your bonus before you actually had your bonus in hand. Um, you know, his pool, his down payment on his new pool, and uh he got the Jelly of the Month Club bonus that year, right? So that that didn't work out really well. And um, or it worked out actually in the end, you know, and so go revisit Christmas vacation and you can kind of understand what not to do with the bonusing world. Uh, but you know, that's just in the insurance industry, it's a little bit different. I know we're gonna talk about profit sharing and contingency dollars with then the independent agency system, but I think the bonusing thing in the in in the whole is just different than it was years and years ago. And it's kind of it's kind of moved down a different path, I guess.
SPEAKER_04So when you say it's moved down a different path, let's talk about that.
SPEAKER_00Yeah, uh, I think that a lot of organizations are hiring with, you know, um bonuses in their compensation or bonuses as maybe the metrics in that are less than they used to be. Like, you know, it's they've kind of replaced in some cases even sales commission or commission dollars with more of a bonus type structure. Um, and I'm just I'm not talking specific to the insurance industry, I'm talking about things I've read, things, things that people have tried to be creative about, um, you know, where instead of this salary being this one big salary, it's no, it's about 70% of that or 80%, you know, 60% of that. And then you have bonuses. And then, but really what you have in that is you have this expectation on the receiving side that oh, I'm gonna get that bonus because the metrics are just not that difficult to meet to meet that bonus, and you know, I think that's kind of the reality. And I'll I'll kind of spin off for a second, like on our partner network. Part of our program is like we, yes, you know, you come in the front door, and you most of our guys start from scratch, and we have what we call benchmark bonuses. The benchmark bonuses are not stretch goals, the benchmark bonuses are survival goals, right? Like you got to do X by this date to survive, and you can earn a bonus from that. Now, personally, and I obviously designed these in in some way, right? And in a lot, I prove them in some way, in the sense of the levels, the amounts. And if you were to talk to super, you know, if you're to talk to really good salespeople, especially those coming out of the exclusive side of the business, they're looking at our benchmark bonuses and going, that's not a big deal. Like, oh, I'm gonna hit those, right? Well, that's kind of the point. Like our our model is built around, we want you to hit those. Like, if you don't hit those, we got to have a conversation about whether you're in the right place and whether this is a career for you, right?
SPEAKER_04Or how we can help you reach the next one, right?
SPEAKER_00How can we help you get from point A to point B because you're not where you're supposed to be? It's not, hey, you might hit these goals because we've got these things stretched, we've got these are gonna be huge, these are gonna be challenging. That's what bonuses used to look like, is what I'm going with. Now it's more of, well, you know, we're gonna give you X pay and then we're gonna, you know, we're gonna pay you a bonus. But really, the bonuses, it's it's truly just another way to give you a salary if you do enough, right? But anyway, that's just a personal observation on my end. Um, not really related to the profit sharing contingency arena of independent agencies.
SPEAKER_04Okay, Shane. So let's talk profit sharing contingency bonus. Why do we call them two separate things except for the fact that it's the insurance business and we love synonyms? Like we are the most synonym heavy industry, I think that's out there.
SPEAKER_02ITP is right there too, but yes, it is, it's right there.
SPEAKER_00It it's true. I had a staff council call this morning with uh five individuals, six and five or six individuals that have been with us for less than two years, all of them, and many of them came from outside the industry and kind of you know, learning the business inside our organization. And I went through that. Like I apologize to them. Like, I'm sorry for the industry that you've joined. You know, you you have um we have a word, we have we have like five words for the same thing over and over and over again. And so um, you know, I think contingency is an older term. Um I think profit sharing is a newer term. And when I say old and new, I mean plus 20 years, 30 years, less than 20, 30 years. Um and you know, contingency is pretty much what what you can think of, like we're gonna pay you X commission, and then if this happens, we're gonna pay you a little more, right? Um, some contingency dollars on top of your base dollars. You know, profit sharing is generally around true production plus a loss ratio component in most cases. And it's truly like, did your book of business make us at the insurance company a profit? Are you within the profit guide, the profit measurements that we say an agency should be in? And if you are, then we're going to allow you to earn some extra dollars, some extra points of commission, right? On your on your premium, on your book of business. And so um that's kind of the XY table um within a profit sharing agreement to simplify it right down to bare bones. Is there's an earned premium?
SPEAKER_04Oh, hold on, hold on. You just said we're gonna simplify it using it at an XY table.
SPEAKER_00That's right. That's right. Is that not simple? Can you not simplify an XY table? No, a graph? Can we not do that?
SPEAKER_04Um, I mean, not if you're telling me what the graph looks like, if you're showing me a graph, maybe. But I mean, now I'm trying to like, first of all, I still haven't gotten over the fact that you use the word drunk to open the podcast. But um beyond that, now I'm trying to XY table and I'm like, okay, where's my note that I'm not allowed to use in Instagram? But I but but I provided my own, so it's okay.
SPEAKER_00And I'm like one from an old podcast.
SPEAKER_04Yeah, here we go, right there. There it is. Here we go.
SPEAKER_00There you go. You got one line going up, you got one line across the top or across the bottom, right? Um so you got it's it's really simple, right? It's very simple. Use your imagination, you know. Um so you know, the really good thing about a table like that. I mean, look, Excel for the you know, Excel or sheets. If you're a Google person, sorry, it's kind of like the Google and the Android people that they're all one and the same, right? So um, you know, it's like it's a spreadsheet, right? It's basically a table or a spreadsheet. You have earn premium and you have a loss ratio component, right? And um, you know, if you want if you want to really get in the weeds on this, come join us at the integra partner network conference in a couple of weeks. And I'm actually gonna do an expert round table on profit sharing and going into the weeds on profit sharing for our partner agents.
SPEAKER_04And uh we can provide you with, you know, like a absolutely.
SPEAKER_00I've got I'm gonna have it's a show and tell for the ages, it's gonna be incredible.
SPEAKER_04It's yes, y'all should come. Y'all should join us. Go to TegmaPartnernetwork.com for more information on how to join us at the beach.
SPEAKER_03Now, for someone who is super new to insurance, why don't you explain loss ratio real quick for someone that that doesn't isn't familiar with that term?
SPEAKER_00Yeah, quick intermission. Uh my nephew is top three at this point, so we're we're we're killing it over here. We're killing it over here on the on the live feed. So anyway, um, so loss ratio. Loss ratio is um a a percentage, right? A percentage, and it is simply uh losses, right, claims, losses divided by what's called earned premium, which is going to create the next definition question in our fun game that we're playing today. What is earned premium, right? All right, so um I'll go back to loss ratio in just a second. And uh, you know, at the end of the day, we've got um written premium. So that means like you buy, you sell a thousand dollar policy, okay, you have a thousand dollars worth of written premium. Okay, got it? Very simple written premium. Um, however, instead of a thousand dollar payment on that, you it's an auto policy, and the customer decides to pay eighty-three dollars and thirty-three cents because that's what the custom company asks them to pay. Um my nephew just won. My nephew just won his class. How awesome is that? Um, so anyway, um, you've got eighty-three dollars a month. So every month in the calendar year, that eighty-three doll is applied, that's earned premium, right? So you've got a thousand dollars of written premium. For simplicity, we're gonna go January new business policy because the rest of because it's gonna confuse everybody to not start in January. It doesn't work this way, but we're gonna do that for simplicity. You write a January policy, customer pays you $83 down or first payment. So in January, you have $83 of earned premium, $1,000 of written premium. Every month that the payment is made, assuming it doesn't cancel and it's it's continuing to pay out, by the end of December, you've got $1,000 worth of earned premium and $1,000 worth of written premium. If you have a claim, okay, again, simple math, we're gonna say you have a $200 loss, right, somewhere during that time period, and you're gonna take the $200 and you're gonna divide it by the amount of earned premium at that point for the year, right? Did it earn its way out? If it earned its way out, that's a thousand dollars earned, that's a 20% loss ratio. Okay, that's that's what we're that's how you get there. So uh it's just a loss ratio of claims divided by earned premium. Losses, here we go again with our terminology, losses, claims, pretty much the same thing, right? For our industry. So uh you're gonna divide that the number of lot the loss amount by the earned premium amount, you're gonna get that loss ratio. So you can kind of see if you amplify that across your entire book of business, right? If you have a million dollars worth of earned premium and $200,000 worth of losses, 20% loss ratio. If you have a two a million dollars worth of earned premium and two million worth of losses, 200% loss ratio, right? Obviously, 20% is better than 200 because you know most of the tables, you're gonna have to be below 55 or 60 percent loss ratio to even get in the money.
SPEAKER_03So where you can really get into a gotcha is if you're in a cat state, catastrophe state, right? And something comes through, and now you can, which both of you are, um, and something comes through, and your loss ratio can go through the roof, and you're out of luck.
SPEAKER_00That's right. And you have situations where insurance companies have gotten smart about this, um. Because what do you have when you don't have a major hurricane or a major loss year? You have higher premiums in that state, justifiably, right? And so all of a sudden you don't have a you don't have a big claims year because you're in a catastrophic state. But that doesn't mean catastrophe happens every single year. It just means it's a higher chance of catastrophe. And when you do have a catastrophe, you have a catastrophe, like really bad. And so what happens is you have these years where nothing no bad stuff, but you have higher premiums. And so the company pays out a lot more profit sharing in those less catastrophic years. And you then all of a sudden you have that bad year, and it's really bad, right? And so you got to kind of look at this from the carrier perspective a little bit. And so the smart carriers have figured that out, and in catastrophic, in catastrophic states, they've gone in and put in what they call cat loads into their numbers, right? So we're in Texas, we're gonna have a higher cat load historically than agents in Indiana or Ohio, right? In a in a less or non-cat state. And so that's part of the equation when you get down to it, is you're going to have different profit sharing tables with cat loads, things like that, that are going to go into that based on where your agency is located.
SPEAKER_03So, you know, in theory, the chances of you being an agent in Texas and diversifying your book are pretty slim. You're gonna have to do non-resident business in other states, and that's not easy. Maybe we'll get into that in another podcast coming up. Uh, so joining a group actually is a really great way to diversify your book in a way.
SPEAKER_00Absolutely. Yeah, it can be. Um, and you know, we we don't hide the fact that we run an agency network, right? So, you know, it's okay. It feels like a little bias here, that's fine.
SPEAKER_04But it would probably give it away where it says integral partner. That's right.
SPEAKER_00So and maybe maybe the the the you know the shirts and all that. So um, you know, the reality of it is though, is that depending on the agency network, um, you might have a little more diversification, right? To kind of help with that, we call it uh cat mitigation, right? So uh part of our network expansion strategy is cat mitigation and being able to spread that risk, no different than an insurance carrier, right? At the end of the day, they they spread their risk.
SPEAKER_04We're trying to spread our risk because the let's let's let's let's quote let's qualify this. Mike is the we're gonna spread the risk. Tanya is we're going to increase the risk.
SPEAKER_00Yeah, that's right. That's right. Well, we want Tanya's earned premium, right? We want Tanya's earned premium and Mike's losses at the end of the day, right? And so there is there is a strategy here. Um, we're not we are we feel like we're semi-intelligent, you know, East Texans over here. I mean, you know, we're we got a little bit of country in us, but we understand math, right? And so there's apparently with all that graph stuff you were getting into earlier. So, you know, that there's but the here's the flip side of that. Like down to the local agency, which is our our goal. Like we we believe extremely uh in the local agent, that insurance is local, that you know, and I I think we overthink at the independent agency level, the local agency, that we do, that we have to be more, right? That we have to we have to expand. Like, like I I talk about this all the time. Like, I get it. This is just facts. This isn't against anything, but you know, take take a less populated state. You know, let's let's just take a lower premium, less populated state like an Indiana, okay? Um, and and I'm using Indiana because it's in my line of sight on my map right up here. You the reality of it is that an agent in Indiana is probably gonna write a little broader spectrum geography-wise than an agent based in Texas, right? Because one, it's just sheer math, population. Uh, that would go for Florida too. Like a Florida agent-based agent probably can hang their hat on writing insurance just in Florida. A Texas agent can just write in Texas. They got all the business they can they can handle it, you know, when it all comes down to it. An Indiana agent may have to be a little more expensive, right? The population is smaller, uh, you know, just the reality of the fact that we are in a state regulated industry, not necessarily a federally regulated industry. So everything is localized, everything is more state specific, but population and market size does matter. You know, California, no different, right? So these larger states, larger population centers, agents tend to be a little more concentrated, smaller population states, agents tend to be a little more spread just to get enough volume to get to where you need to get to. So I'm not against a Texas agent riding just in Texas. I that's not a problem. But to Mike's point, one of the ways to kind of insulate a little bit against your concentration, especially when you happen to be in a population state, which is most of them, that also have cat exposure, right? California, Texas, Florida, New York, you know, you can't dismiss nor'easters, you can't dismiss uh the you know, the occasional hurricane, you know, let's not forget Sandy. And so you've got some situations where the most populated states in the country tend to be cat exposed. It's just the way it is, right? And so um I'm not opposed to concentration at the local level, but the question becomes is your agency network doing things to mitigate that? Are they working for you in that broader capacity? And that is something that we're doing. It's it's definitely a marathon, maybe even an ultra marathon versus a sprint. Um, it's not something that we solve like we're solving immediately, right? It's just a solve strategy, and it's a strategy that we're looking at big picture.
SPEAKER_04So, first of all, are ultra marathons really a thing? I'm looking this up. It's like actually a thing.
SPEAKER_00Absolutely.
SPEAKER_04Oh, wow.
SPEAKER_00Absolutely.
SPEAKER_04Yeah, wow.
SPEAKER_00It's not it's not 26.2. What is it, 50? 50.
SPEAKER_04It says it extends to but they they typically start at 31 and they extend to 100 miles or more.
SPEAKER_00Yeah, wow, ultra marathon, uh, last man standing. That's a really cool race, by the way. Um, look that one up.
SPEAKER_04Um I have a friend that does these iron mans, and I'm just like, I just want to run a 5k, but I don't want it road about it, you know, do it bad enough to actually trade for it.
SPEAKER_03No, that's not right. If you're you if you're running a longer, if you're running an amount that if I drove it, my butt would start bothering me because I've been sitting too long, that means you're running way too much. That's ridiculous.
SPEAKER_00I mean, people are doing it. They're they're you know, they really they're doing it for fun. Good for doing it for fun. Then that's you know what?
SPEAKER_04You know what? I'm gonna be the person that goes to that race, and I'm gonna like hold up signs with glitter on them, and I'm gonna cheer for you, and I'm gonna be at that finish line with my pom-poms, and I will do all of that.
SPEAKER_03No, unless you're a Navy SEAL, you don't need to run it.
SPEAKER_00No, so I mean, I I think that's wonderful, but the only problem, Tanya, is the people running these things are not the glitter pom-pom people. I just want you to understand that they're different people, right? Like it's okay. It's okay. Like we're all different, you know, it's not strange, it's just different. And it it they're just not the same people. I'm just gonna go ahead and break that that news to you.
SPEAKER_04So I want to go back to uh talking about, you know, we are an independent agency group and we are talking about profit sharing. And there may be some people that are listening to this podcast that are in groups that are like, why does profit sharing even matter? We don't see it.
SPEAKER_01Yeah.
SPEAKER_04Because not all groups share their profit sharing, because that's not the way their uh financial strategy is set up.
SPEAKER_00Yeah, and and look, everybody has their business model, right? And um, you know, there's reasons that I mean there's always whys to to decisions, in my opinion. And I know we have our whys uh why we do it, and and there may be other groups out there that have their whys uh on why they maybe don't do it or don't share it. Uh there there are organizations out there that will um maybe it's some strategy of how they gain access, how they give access, maybe what they take off of an agent. I'm not saying it's bad or good. I'm just saying it's just the way their model works, where they retain all the profit share and they don't they don't share it. Um we happen to be one of the networks that we share it, and everything is kind of transparent, and we we we disclose it and we talk about what we what what the numbers look like, um, how an agent can reach and and participate in those numbers. Um, you know, we have things that we do within our profit sharing model. We call it bonus sharing. Matter of fact, that's actually something that I was thinking about the other day. We call it but profit slash bonus sharing. Uh, we probably should drop the profit and just go bonus sharing because sometimes um, you know, there are production bonus negotiations that are done that aren't really loss ratio components at all. And um, so it's really bonus sharing from the integra lens that we look at it. Most of it is still profit sharing at the carrier level because it has a loss ratio component to it. And, you know, an agent that is in a network, in a group that doesn't have profit sharing, um, you know, I think it's a fair question, right? Um, you probably should have asked that going in the front door. Um, you know, but a lot of times what happens is agents, um, you know, it's it's just a little bit of preying on ignorance. They don't know what they don't know. And, you know, an agent that is moving from a second career or starting a second career in the insurance industry, they wouldn't necessarily understand that this is even out there. At the same time, I'm not sure what the exclusive channel looks like from carrier to carrier. Uh, I'm not sure what franchise models look like from organization to organization. Uh so there are there are realities that not everyone makes these tools available, these extra earning opportunities available. Uh, we happen to be one of the the organizations that that do that. We make our everything's vertically aligned, right? Like we share, we share in the process. We have a formula, we have uh we have a loss ratio component. Like there's just ways that we do this that we feel like brings us to a fair end result.
SPEAKER_04One of the ways I I think we're able to do it is that we are still a privately owned company, where so many other agency networks um are publicly owned companies and um of course have to make sure that their shareholders are are taken care of. And with us being privately owned, I think we have the opportunity to share that money with our partners versus our shareholders.
SPEAKER_00Yeah, I I think that's also fair. Um, you know, either publicly owned, publicly traded or uh private equity owned. Not the same thing as privately owned, by the way. Uh private equity owned, um, where they're you know, you're owned by a group of investors. And look, the private equity game is it's sort of a race to the bottom, in my view, because the private equity firm that makes the investment the first time, at some point, there's got to be a a uh a trade to the next private equity firm typically, or maybe they're gonna take that company public. Um, but most of the private equity buyouts end up in a second, third, and fourth private equity buyout. And the only way that one private equity buyout can be sold to the next private equity buyout is there's got to be more profit, right? It's got to be bottom line driven. Um, and so to Tanya's point, very true, uh, you know, unless I need, you know, unless it's you know at the 10-year mark and I need a new vehicle, like there's no one else to, you know, there's no one else to ask, like, hey, you know, and that's an inside joke. Like, you know, we we we get to make that decision as a family-owned, private-owned business. I ultimately, at this, you know, today, I get to make that final decision. And today our model is built on sharing, partnering. Um, it's not built on how much bottom line can we increase from year to year. We have to make money. Don't misunderstand me. We have to turn a profit and we need to hit a profit margin, right? Um but it can't reach the point of greed or it becomes unsustainable.
SPEAKER_04We're coming to the end of first quarter, beginning of second quarter. What do we need to do as agents to look at the next nine months to make sure we get profit sharing with our carriers? By the way, I want to go back to something you just said, talking about uh, you know, the family-owned company. I was thinking about it yesterday. I was on a call with your daughter Emma, and there are four generations currently of your family that are currently working in our agency. That's amazing to think about. Three and a half, four generations.
SPEAKER_00Three and a half. It's ten and a half, four. Yeah, yeah.
SPEAKER_04Three, but really, from a from a time perspective. What's the half?
SPEAKER_00Well, it's an it's an East Texas term, kind of like um I'm kidding. Um, it's a made-up term by me. So uh, you know, the half is something I've made up because I have two siblings who are significantly 14 and 16 years younger than me. Right.
SPEAKER_04That's a generation.
SPEAKER_00So it's it's a generation, and it's close to a generation in in a lot of circles, right? Obviously, 14 and 16-year-olds in modern day, you know, that's not necessarily, you know, where we want that happening. But um, you know, a hundred years ago, they were married at 14 and 15 and having babies and all that, right? And so I use the whole half generation concept to mean that we have ownership currently in 70s, 50s, and 30s as far as age brackets. And so we technically have ownership of our organization in three generations of boomers, Xers, millennials, right? And then Emma, of course, and her sister and my nephews and my nephews and nieces, they're the fourth generation, technically, but they're really only the third generation, right? And so I use the half to kind of illustrate the example of age difference between me and my youngest siblings.
SPEAKER_04But with Emma being uh being with us uh for her last semester as her intern, that's pretty fantastic to have three and a half slash four generations all working together and no one's killed each other yet. Sure. That's that's fantastic.
SPEAKER_00Yeah, it it's it's really cool to see and really fun. And um, you know, I think it totally another total another topic, probably like Mike said earlier, this is a great topic for another podcast. But um, you know, I love the idea of bringing back multi-generational businesses. I've been uh talking, looking, uh researching, you know, the return of multi-generational ranches. Again, this is kind of not to beat on the private equity industry, right? But uh, you know, multi-generational ranches have succumbed to private equity, no different than multi-generational independent agencies. And so um, you know, we like the idea of running our business as if it's going to perpetuate generation after generation. Now, does that mean it has to happen that way? No, but here's the problem you can't run a business and set a business up. If I was just trying to like blow the business up to get to the numbers to sell, you would run it a lot differently than if you were going to try to run it as a multi-generational business. Like, just like the profit sharing question. Like, would we share profit sharing dollars? Or would we just try to like produce, produce tons of production, get hit the numbers, gather all the money, put it on a an investment board and you know, presentation and say, highest bidder, come write us a check. That's what you have with some organizations out there that are like just go, go, go, go, go. Um, that's what publicly traded companies in some sense have to kind of deal with, with the analyst and and kind of having to deal with quarterly, quarterly calls, right? How much money did you make this corner quarter? We don't have to deal with that. And we don't have to worry about that because we're focused on multi-generational ownership, because we can't reverse that if we don't run it that way in the first place, right? And so think about it this way too, because this is one of my this is one of our our things. I talk about this at conference, I talk about this in in in any setting with our our agents. If I'm an agent, I'm gonna start my own independent agency from whatever background I'm coming. I want to ask the agency network that I partner with, what are your long-term plans? Because at the end of the day, my agency is going to be built on the infrastructure of that agency network. I want to know what the infrastructure long-term plan is. And when I say infrastructure, I don't just mean technology, I mean the chassis, I mean the culture, I mean the ownership. Like, are you trying to, you know, add hundreds, thousands of agents, get a distribution network established? Grow a bunch of premiums so you can sell to the highest bidder. And I'm telling you, if we were doing that, we would we would run it a whole lot differently. We would look at the world through a different lens. Um, we're actually trying to run it on a sustainable basis, which is a lot different when it comes to how the profit sharing program is allocated across the network. What was the original question?
SPEAKER_03I I only remember half of it.
SPEAKER_04No, I the original question was we're at the end of first quarter, beginning of second quarter, what do we need to be doing inside our independent agencies to set us up so we get mailbox money in April of next year?
SPEAKER_00Well, first thing you need to do is um you need to look at your retention with all of your profit sharing eligible carriers, right? So you can't grow without retaining. If you're churning, there's two things that are gonna happen. If you're running low retention with a carrier, even if you're writing a lot of new business with that carrier, the business that's leaving is going to be more profitable than the business that's staying. Let me explain that. The business that's staying can't leave and get a better rate because they've got claims, because they've got incidents, whatever. The business that's churning because you're maybe selling on price instead of more value is getting a better rate and constantly shopping and shopping you and churning, and that business is able to do that because it's actually maybe loss-free, maybe it's less claims. And so churning-oriented books of business tend to have higher loss ratios. So retaining and building the right book of business that can mature over the long period of time, not shifting business from carrier A to carrier B if you can help it. I'm not advocating losing clients. I'm just saying don't be in the what's in it for right now business, be in the build a book of business with very multiple carriers and retain that business within those carriers. That business is going to mature over time and your loss ratio is going to be better. Hey Stephanie, I want to jump in on that as asked.
SPEAKER_04I want to I want to ask you a quick question on that. There's a lot of independent agents that feel like their job is to get the lowest rate for their clients.
SPEAKER_00Yeah. Um, that's that's kind of an exclusive agent direct channel thing. Um, and that's not necessarily what's best for your clients, and it actually isn't definitely not what's best for you. I'm not saying there's not a reason to remarket an account, and you have that tool available to you whenever you have that need, but it should never be your first action. Your first action should never be let me look at my renewals every six months, every 12 months, and let me shop them every turn. That is a money-losing endeavor for the agent, and it's actually not a benefit for your client.
SPEAKER_03But to the point originally from before this point, understanding where you have profit sharing and don't have profit sharing is not a October to December situation. That is an all-year thing. You know, you're gonna come across prospects and clients all year long where you're gonna have two very similar quotes, and one is gonna be with a carrier that you have profit sharing with, and one is gonna be with a carrier you do not have profit sharing with. You have to be mindful of that at all times.
SPEAKER_00Yeah. And look, we need to do what's best for our clients within reason, right? We have to be careful about that. Like the customer's always right. Um, the customer is not the insurance expert. You are the independent agent, you're the risk manager, you're the insurance expert. Um, you're, you know, no different than um uh a doctor or an attorney. Like, you know, I'm not saying that every attorney is the smartest person in the room. I'm just saying that they've been to law school, they've passed the bar exam, and you haven't, right? And so you are an insurance agent, you've passed the insurance exam. Hopefully, you've continued you, you know, you've had to do continued education, you're learning and working on your craft, and you are a professional. Um, you know, the race to the bottom on just price, the churn, um, understanding what is available to you, like that's part of kind of like one of the things that we've we recognize over the last few years is we need to make sure that all of the agents in the network understand who has come to the day table as carrier partners with bonus sharing agreements in some way or another, right? Because they're partnering with us, they they're telling us, hey, you know, we want to be your partner, we're gonna give you this chance to earn some additional dollars that you can reinvest in your business, etc. And um we see you as an important partner, so we're gonna give you this. That's what's a big deal, and why you need to be aware of that.
SPEAKER_03I think another important point is that profit sharing, when you are just an independent agency and you're not part of a group, can look very different. Sure. Uh, first of all, not all carriers that have profit sharing within groups are going to have profit sharing outside of groups. And uh if you're a small or small-ish agency, the chances of you hitting the production goals for multiple carriers is decreased or diminished drastically. Correct.
SPEAKER_04So we have several agents that have come on board with us that have established independent agencies, but because of profit sharing, um, they're actually making more money at the end of the year because of because it's more lucrative with us than it was on their own.
SPEAKER_00Correct. And and you know, one of the things we probably should have started with was the history of profit sharing, history of contingency, right?
SPEAKER_04So we may have to do a part two on this particular there may be a part two here.
SPEAKER_00Well I understand. And but let and I'm gonna I'm gonna say this real quick. 40, 50 years ago, average commissions at an agency would have been 25, 27, 30 percent.
SPEAKER_05Wow.
SPEAKER_00Sometimes down in the low 20s in some cases, but they were all north of 20%.
SPEAKER_04Um, I had no idea of that.
SPEAKER_00Today, average commissions within an independent agency are gonna hover. You know, I'm taking an average, new business plus renewal. What carriers have done is those commission dollars, commission rates have gone down into the 12 range. So they're about half of what they were 40 or 50 years ago. 40 or 50 years ago, there weren't profit sharing dollars. There weren't necessarily contingency dollars. Agency, agencies were kind of paid up front for their services. Um, what the carriers have done, simple economics on their end, is they've created kind of what a lot of industries have done with with certain sales roles within various jobs. You have a base commission that's lower than it was 50 years ago, and you have additional points available to you if you hit certain metrics, right? And so um now an agency, a small agency that's say somewhere between three and five million in premium, you know, there could be two to three points available to them in bonus dollars through profit sharing that they can't reach on their own because a lot of those direct contracts have minimum premium volume commitments that they can't meet, right? And so a lot of networks have fractional qualifications of business of business premium.
SPEAKER_03I just saw a squirrel. I'm sorry. You guys are both saying at the beginning of this that you're going to the Sahara this weekend. In the corner of my computer while Shane was talking, the little thing pops up on the weather that says temperatures to plummet on Sunday.
SPEAKER_00See, see, the weather's drunk. I'm telling you, the weather's drunk right now. Take away the bottle.
SPEAKER_04Bless your heart. Well, if you would like to speak at a Christian women's conference in Fort Worth this weekend where it's going to be uh 95 to 97 degrees. I mean, you know, hey, uh we can surprise them with a different pace.
SPEAKER_05That's right.
SPEAKER_04But I do think we need to have a part two of this because every the information that we've we've shared today has has been fantastic. But I do want to give um and and it helped, I mean, helped me to understand so much more about what we do and why we do it. And I had no idea that commission structures had plummeted like that. I mean, I mean, I know that Shane, you have your your button that says, you know, what I do is worth 15%.
SPEAKER_00Yeah, that's right. That was a big theme of the channel about 20, 25 years ago. Yeah.
SPEAKER_04Yeah. So um, but I but I do want to do some really practical um uh advice. So let's do a part two next time and um and come back to that. And I'm gonna leave leave us today with this quote from uh Michael Phelps. I think that everything is possible as long as you put your mind to it.
SPEAKER_00And I'm gonna speak to one thing before I close this out. Um we have not fired Robbie Jabor. Um, I thought I would let the world know that Robbie is a still a member of the Integra Partner Network leadership team. Um Robbie is going to be uh kind of an occasional guest uh for us in a plug-in for us, kind of a pinch hitter. Uh, but Robbie's schedule and just things that he has going on uh just kind of made it a little more difficult for him to be consistently available on the podcast. The interpretation of that is Mike and Tanya don't really do anything. Um, and so uh they're okay on the podcast, and that's obviously a joke, they do a lot. Um, Robbie just had a little different schedule. And so, anyway, uh I just thought it was worth noting that we did not kick Robbie off the podcast and we did not fire Robbie from the podcast or Integra as a whole. And so you will see Robbie again. He just will not be a week-to-week regular. Um, and so just just know that. And I thought that was needed to be said. So yeah.
SPEAKER_04Oh, so I'm gonna go back to my Michael Phelps quote. I think everything is possible as long as you put your mind to it, which means he could have done it.
SPEAKER_00He could have done it. Attitudes of choice. Make a great one.
SPEAKER_01Hi, y'all. At the Integra Partner Network, we understand that carrier access is the key to your agency's success. That's why Integra offers direct access to top-rated personal and commercial carriers, ensuring your agency thrives in today's challenging market. And with our comprehensive resources, profit sharing, and bonus opportunities, technology and peer support, all of you retain 100% of your book with no penalties to exit. Integra is ready to empower you and your agency to find sustained growth. Find your way to Integra. Visit IntegraPartner Network.com today. That's IntegraPartner Network.com.
